One of the central topics of Donald Trump's campaign is a terrible idea

People
participate in a labor activists' march in Lansing, Michigan,
June 1, 2009. For decades, unionized manufacturing jobs have been
considered the surest path to middle-class prosperity and
realizing the vaunted American dream for blue-collar
workers.Mark
Blinch/Reuters

Protectionism has grown quite popular as American workers
continue to worry about losing jobs to other countries.

And politicians have zeroed in on these anxieties as they vie for
the top job in the White House.

Donald Trump made the debate over free trade one of the central
topics of his campaign after criticizing China,
Mexico, and
Japan. He even once suggested putting a
45% tariff on Chinese imports.

Meanwhile, Hillary Clinton has recently
edged away from the Trans Pacific Partnership (TPP) after
previously calling it the "gold
standard" of trade agreements.

Bank of America Merrill Lynch's global economist Ethan S. Harris
and US economist Lisa C. Berlin argue that this shift has two
major near-term implications.

"First, we now believe the
Trans-Pacific Partnership is less likely to pass the US
Congress," the duo wrote in a note to clients. "Given the recent
very negative rhetoric from both sides of the aisle, we now think
passage of TPP is a very close call under a Clinton Presidency
and is unlikely under Trump."

And "a second implication is that conflicts over currencies could
escalate," they continued.

As they explain in greater depth regarding point two:

The US Treasury has been flirting with naming China and other
countries 'currency manipulators' for many years. Recently, they
put a big
spotlight on China, Japan, Korea, Taiwan and Germany. They
said that each had exceeded two of three thresholds for being
designated for 'bilateral engagement' — (1) a bilateral trade
surplus with the US of over $20 billion, (2) an overall current
account surplus of 3% of GDP, and (3) persistent purchases of
foreign currency that amount to more than 2% of GDP over a year.
Under a Clinton administration, we would expect Treasury to
follow through on these rules, while they would likely be
tightened further under a Trump administration.

Although the aforementioned short-term implications are certainly
interesting to consider, perhaps the more interesting thing about
this whole populist shift is the huge gap between economists'
opinions on free trade and those of regular Americans.

Mainstream economists pretty much all
agree that free trade is "good"
for an economy in the long-run (even though within an economy
there will be some people who benefit less), while
trade-restrictive measures
hurt consumers.

However, many regular people believe that free trade actually
hurts the US — which is likely a reflection of their personal
experience. According to Pew Research statistics cited by Harris
and Berlin, 89% of Americans think that the loss of US jobs to
China is a somewhat or very serious issue. Moreover, only
46% of Americans think NAFTA was good for the
economy.

China's emergence as a great economic power has induced an
epochal shift in patterns of world trade. Simultaneously, it has
challenged much of the received empirical wisdom about how labor
markets adjust to trade shocks. Alongside the heralded consumer
benefits of expanded trade are substantial adjustment costs and
distributional consequences. ... Adjustment in local
labor markets is remarkably slow, with wages and labor-force
participation rates remaining depressed and unemployment rates
remaining elevated for at least a full decade after the China
trade shock commences. Exposed workers experience
greater job churning and reduced lifetime income. At the national
level, employment has fallen in U.S. industries more
exposed to import competition, as expected, but offsetting
employment gains in other industries have yet to
materialize.

Just to be clear, it's way too much of an exaggeration to
say that free trade is not "good."After all, it's
definitely easier on consumers' wallets to not pay 45% tariffs.
Plus, one could argue that15 years isn't
enough for the global and US economies to adjust to the huge
China shock.

But it's still interesting to think about the split between
what's "good" for the global and US economies versus what's
"good" for your everyday American worker — and how these kinds of
issues will be addressed going forward.